May 11 (Reuters) - Australian shares fell on Monday as risk aversion deepened after U.S. President Donald Trump rejected Iran's response to a peace proposal, while CSL slid to a near-decade low, with the biotech firm cutting outlook and flagging $5 billion in impairments.

The S&P/ASX 200 index .AXJO was down 1% at 8,661.4 points, as of 0031 GMT. The benchmark closed 1.5% lower on Friday.

Escalating geopolitical uncertainty sapped investor appetite, with Middle East tensions reviving demand for safe-haven assets and weighing on equities.

President Trump on Sunday rejected Iran's response to a U.S. proposal for peace talks, dashing hopes for an imminent end to the 10-week-old conflict that has caused widespread damage in Iran and Lebanon, paralyzed maritime traffic in the Strait of Hormuz and driven up global energy prices.

Back on the bourse, Australian firm CSL CSL.AX fell more than 20% to log its worst trading day, while hitting its lowest level since mid-December 2016 after trimming fiscal 2026 earnings outlook and flagging $5 billion of non-cash impairments over the next two years.

The stock emerged as the top laggard in the benchmark and weighed on the health sub-index .AXHJ, which lost more than 9% on Monday.

Financials .AXFJ shed 1.7%, with the "Big Four" banks losing between 0.6% and 2.6%.

Last week, the Reserve Bank of Australia delivered its third consecutive rate hike of the year.

Technology stocks .AXIJ shed 1.3%, and were on track for their worst intraday fall since April 28, if current momentum persists.

In contrast, energy stocks .AXEJ gained nearly 1%, snapping a three-session losing streak, as oil prices jumped on concerns the failed peace proposal could keep global supplies tight for longer.

Sub-index heavyweights Woodside WDS.AX added 0.9% while Santos STO.AX advanced 0.6%.

The mining sub-index .AXMM also added 0.8% with top players Rio Tinto RIO.AX and BHP BHP.AX gaining 1.1% and 1.2%, respectively.

In New Zealand, the benchmark S&P/NZX 50 index .NZ50 was down 0.7%, or 93.1 points, at 13,082.1 points.

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